Facebook plans to raise $US10.6b in mega IPO

May 4, 2012

Facebook aims to raise about $US10.6 billion ($10.3 billion) in Silicon Valley's largest IPO, dwarfing the coming-out parties of tech companies like Google and granting the world's largest social network a market value close to Amazon.com's.

The eight-year-old social network that began as Mark Zuckerberg's Harvard dorm room project indicated an initial public offering price range of between $US28 and $US35 a share on Thursday, yielding a valuation of $US77 billion to $US96 billion.

The social networking phenomenon stands to raise as much as $US12 billion at the upper end of that range. But if an over-allotment or "greenshoe" option is triggered, the company could sweep up a maximum of $US13.6 billion, according to a prospectus.

The indicative price range can be adjusted depending on Wall Street's response. Investors are expected to flock to the highly anticipated IPO, though some have voiced concerns about the social network's longer-term growth.

Last week, Facebook reported its first quarter-to-quarter revenue slide in at least two years, a sign that the social network's sizzling growth may be cooling just as it prepares to go public. Its stock should begin trading in about a week or two.

"People are going to be very comfortable with this valuation," said Sam Schwerin of Millennium Technology Value Partners, which owns Facebook shares worth roughly $US200 million. The firm is not selling in the IPO.

"A price range of $US28 to $US35 will be a relief to some people who are concerned that they may try to take the highest possible price because of high demand.

"The amount being raised is noteworthy. Selling stockholders are raising about $US5 billion in the IPO, which is a lot," Schwerin said.

Road show

Facebook executives are due to hit the road on Monday, presenting their investment case to audiences. They will start in New York, go to other major cities such as Chicago and Boston, and end up on Facebook's home turf in Menlo Park, California, according to a schedule obtained by Reuters.

Zuckerberg is expected to participate in the two-week roadshow, a source has said, though Chief Operating Officer Sheryl Sandberg and Finance Chief David Ebersman will lead the briefings.

Facebook, which plans to list its stock on the Nasdaq under the ticker "FB", has long tantalized investors with the prospect of a mega IPO.

Its capital-raising target far outstrips big Internet IPOs that came before it. Google raised just shy of $US2 billion in 2004, while last year Groupon tapped investors for $US700 million and Zynga raked in $US1 billion.

At the maximum end of the range, Facebook's value would be close to $US100 billion. That would rival Amazon.com's and Cisco Systems' market values of just over $US100 billion, while surpassing the combined market value of older technology companies Hewlett-Packard and Dell.

In its prospectus, Facebook said the "lock-up" period, during which employees cannot sell shares after the IPO, would range from 151 days to 181 days.